Japanese Officials Warn of Potential Currency Intervention
Japanese Yen Hits Weakest Levels Since 1990
The Japanese government officials continued their verbal warnings about potential intervention in currency markets as the Japanese yen reached its weakest levels since 1990 following hotter-than-expected U.S. inflation data.
USDJPY Pair Hits 34-Year High
The USDJPY pair surged to a new 34-year high of 153.24 on Wednesday, driven by a stronger dollar that also pushed the dollar index to a five-month high.
Verbal Warnings Lead to Retraction
However, the USDJPY pair retreated from its highs in Asian trade on Thursday, settling around 152.84. Japanese Finance Minister Shunichi Suzuki and Vice Finance Minister Masato Kanda reiterated their concerns about recent “excessive” moves in the foreign exchange market, hinting at potential intervention.
Fears of Intervention Support Yen
Fears of intervention boosted the yen’s strength, with previous government interventions led by Kanda in 2022 causing a pullback in the USDJPY pair when it last tested levels above 152.
Outlook for USDJPY Pair Amid U.S. Rate Hikes
Despite expectations of government intervention, the outlook for the yen remains negative due to higher U.S. interest rates. Strong U.S. inflation data and concerns expressed by central bank officials have led to speculation of prolonged rate hikes by the Federal Reserve.
Key Drivers for Yen
U.S. interest rates are expected to be the primary factor influencing the yen in the near future, as the Bank of Japan has given little indication of when it might raise interest rates further.
